Plea Before Kerala High Court Accuses State Electricity Board Of Illegally Creating Massive Financial Liabilities On Consumers

A Public Interest Litigation (PIL) has reached the Kerala High Court alleging that the Kerala State Electricity Board is running on heavy loss due to its unjustified salary structure which is thereby causing the liability to be passed on to the consumers.

A Division Bench of Chief Justice S. Manikumar and Justice Shaji P. Chaly on Monday admitted the PIL filed by Kerala High Tension & Extra High Tension Industrial Electricity Consumers' Association. 

The plea was moved by the registered association through Senior Advocate George Poonthottam alleging that the electrical energy consumers were being looted by the Kerala State Electricity Board. These High Tension & Extra High Tension electricity consumers of Kerala consume 27% of the electricity distributed by the Board, which constitutes 32% of the income generated.

It has been contended that the collective bargaining capacity of the employees of the Board who enjoy the political patronage of all significant political parties in the State has been creating financial liability over the entire public.

The main argument in the PIL is that the employees of the Board are members of recognized trade unions. Therefore, the share payable to the union by the employee is deducted at the source when the salary bill is prepared for the account of the union.

This implies that the unions are the proportionate beneficiaries of any increase in salary or salary revision. However, the ultimate consumers are at the receiving end of this illegality and they are powerless before the collective force of the trade union. 

"At the risk of inviting the enmity of the powerful union, the petitioner Association is compelled to approach this court in public interest, as otherwise the petitioner Association will be committing a social crime by keeping silent without exposing the illegality when the reality is  examined from an objective perspective. Silence on an issue like this will lead to collapse of the entire system," reads the plea.  

Initially, the Board was part of the State Government. However, after the introduction of the 2003 Electricity Act, it became necessary to form separate companies for the distribution of electrical energy in every State.

Accordingly, the Kerala State Electricity Board was restructured as Kerala State Electricity Board Limited and incorporated as a company w.e.f. 1st November 2013. While so, the entire loss so far accrued in the account of the Board was taken over by the State. Therefore, the Board was constituted with zero liability. 

The petitioner association pointed out that the object sought to be achieved by insisting the formation of the company was to reduce the liability and to function as a consumer-friendly organisation. However, it has been argued that in the State of Kerala, only one company was formed retaining all the liabilities of the erstwhile Board, without reducing the expenditure in any manner. 

According to the petitioner, this resulted in the difference in the income and expenditure continuing as such, thereby resulting in a huge loss for the company and at the same time, burdening the cost without considering that this liability was to be shared by the consumers.

Meanwhile, agreements were entered into between employees of trade unions and the Board and were implemented even without obtaining the permission or approval from the State Electricity Regulatory Commission or by the State Government.

It is the case of the petitioner that these agreements were executed without examining the liability that is created, which in fact is apportioning of the State asset. The PIL has also produced a copy of the latest annual report of the Kerala State Electricity Board Ltd published to prove the liability which exposes the financial position of the company. 

With the intervention of private players and non-conventional energy, the manufacturing cost of electrical energy throughout the world as well as in India has been reduced substantially. Therefore, although a unit of electrical energy can be procured at the cost of Rs. 2.00 to Rs. 2.50, today, the supply cost of the Kerala State Electricity Board Limited is Rs. 6.50 to Rs.6.80/unit.

However, despite selling the energy purchased at double the rate to the consumers, the Board is running on heavy loss instead of making a profit. This is because the difference in the supply cost is due to the unjustified salary structure entered into by the Board without examining the impact of such agreements and the liability that is to be passed on to the consumers. 

The petitioner has suggested that prudent utilization of the available resources including manpower can provide better services as envisaged under the Electricity Act 2003.

It has been pointed out that the number of employees can be reduced substantially and added that by reducing the number, the Board would not be deemed unfriendly to the labourers by the optimum utilization of the labour. It is all the more required for its continued sustenance without the same being collapsed due to its own weight. 

It was also brought to the notice of the court that the State Government had time and again directed the Electricity Board to reduce its employee strength and to run the said company as a commercial unit to ensure that there must be a cap on the pay structure.  

The PIL has put forth two significant issues before the Court: 

1. Whether the Board is legally or from any perspective, justified in creating financial liability by entering into agreements ignoring the capability of meeting the resultant expenses solely on account of the fact that the Board is an authority coming under Article 12 of the Constitution of India?
2. Whether agreements entered into on account of fraudulent intentions can continue to burden the State exchequer and the public at large, ultimately, when such agreements are contrary to the public interest and entered into through fraudulent means?

"All these together will result in collapse of the system on account of the unbearable weight created and generated on account of imprudent decisions taken by the Board forgetting their obligation to the public at large solely for satisfying the higher-ups in Governance, the trade union leaders who are the direct beneficiaries of such imprudent decisions," reads the plea. 

The petitioner has also argued that the regulatory body formed with noble objectives has become a facilitator for endorsing illegalities. It has also been contended that in an overall analysis, the agreements, and the liability thus created are as good as stealing away the assets of the Trust by the trustees creating liabilities to the beneficiaries.

On these grounds, it has been prayed that a writ be issued declaring that any agreement creating financial liability without generating income by the Board to meet the expenses is against public interest and the interest of the future generation. 

It has also been prayed that Kerala State Electricity Regulatory Commission may be directed not to take up or consider any proposal from the Board for increasing the manpower resulting in an additional financial commitment based on the amended regulation of 2022.

Case Title: Kerala High Tension & Extra High Tension Industrial Electricity Consumers' Association v. State of Kerala & Ors.